So the problem is, once you detect a user is running arbitrary unsigned code on their system, how do you differentiate between them using that capability for cheating or running the world's most convoluted SSH server? Once the system is compromised, you don't really know what the user is doing, and as such any network traffic cannot really be trusted.

Prevent them from logging into your network. (You own your network)

You own the device. Whatever you do with it is up to you. (Despite their whining about how "you only own a license to posses the device")

This is essentially what they do. A console detected running modified software gets banned from PSN.